Is Amazon a Great Investment? 3 Reasons to Buy AMZN Stock - Stocks in the News
By Zacks.com. June 30, 2015, 08:41:57 PM EDT
For years, Amazon ( AMZN ) has been one of the biggest players in online retail. More recently, the company has expanded into other areas, producing their own line of electronics, innovative web services, and breaking into emerging markets. It is for these reasons that investors should continue to consider AMZN for their portfolios, as the company's diverse revenue streams could make them a valuable long-term investment.
1. Amazon Web Services
Amazon's latest earnings report gave investors a surprise source of confidence with the success of Amazon Web Services (AWS). AWS is a line of cloud-based technology infrastructure programs, which help companies with computing, storing data, analyzing online metrics, and creating applications. Basically, companies pay Amazon for a set of tools to boost their virtual presence. Right now, AWS is available in the US, Australia, Brazil, China, Germany, Ireland, Japan, and Singapore, with the company recently announcing expansion into India within the next year.
AWS has proven its ability to attract big clients, with Reddit, Netflix, and Spotify hosing applications via the service. AWS also goes after start-ups like Airbnb, as well as public sector clients like the FDA. According to a recent study by the International Data Corporation, on average AWS companies will receive five-year business benefits worth over $1.5 million and earn 560% return on their initial investment. Not only has Amazon captured a new base of customers with AWS, but they offer a quality product. Look for AWS to continue to expand in the coming years, with AMZN investors reaping the rewards.
2. Cutting-edge electronics
Amazon has made waves with their own branded products like the Kindle e-book reader and the Fire phone. It has been interesting to watch what was once just an online marketplace transform into a diverse technology company. Nowadays, Amazon sits on the cutting-edge of electronics and computer products, threatening to become a staple in the average household.
This idea is really best illustrated by Amazon's Echo product. The Echo is the physical product companion to Amazon's Alexa software, which is a cloud-based home automation system. By simply making voice commands, users control the Echo, which can control music, stream radio applications, and
manipulate compatible products throughout the home, like light switches and home-security systems.
As detailed by this Zacks report. Amazon has recently announced a developer's kit and $100 million investment fund for the Echo, which stands to be a major player in the expanding home automation market. This should come as more good news for AMZN stock as well.
3. Breaking into China
One of Amazon's main setbacks has been their inability to break in to the larger Asian markets, which have been dominated by competitors like eBay ( EBAY ) and the Chinese company Alibaba ( BABA ). This stands to change with Amazon's recent decision to expand their lending services into China. Amazon Lending provides loans to vendors to help them with inventory, and expanding the service to China will allow massive expansion into partnerships with Chinese vendors.
Although many critics have pointed out the risks of marketplaces giving loans to vendors, it became clear that Amazon would have to match this service as eBay and Alibaba both currently offer it as well. Furthermore, Amazon looks to mitigate risks by using algorithms to pinpoint the best companies based on how often they run out of stock, the popularity of the products, and inventory cycles. If Amazon can keep risks low while also partnering with more Chinese vendors to offer more products in China, AMZN stock could be rewarded.
Gone are Amazon's days as just an online marketplace. The company is now very much a giant in the technology industry, and investors may be able to capitalize on this in the long run. With AMZN being bumped from a Zacks Rank #3 (Hold) to a Zacks Rank #2 (Buy) within the last week, the most recent trends are indicating that investors may want to consider the stock for their portfolios and especially if the trends outlined above pay off in the future.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free reportSource: m.nasdaq.com